Writing in Ad Age, Associate Professor at Syracuse University, Brian Sheehan, argues that the value of our services in the ad industry is diluted by too much competition.
The sheer number of agencies means most will do whatever it takes to “win.” And with so many players, the market price and value put on ideas comes down to the lowest common denominator — the more players, the lower the denominator. If a CEO in Singapore is willing to work on a piece of business at a loss just to keep a dot on the map in Singapore, then that becomes the price other Asian agency competitors begin working for. If a CEO in Chicago hasn’t had a win lately and wants to prove that her agency is still successful, she will undercut the market for the good of morale, and her career.
And let us not forget the flood of digital agencies that want traditional business and vice versa, which has introduced yet another level of competition. On a revenue basis, Digitas is now the fifth-largest advertising agency in America.
When you think about it, the ad-agency business is a lot like the music business. Digital-music piracy is illegal. But once you have lost your ability to defend your rights and, therefore, your product’s value, like the music production companies have, it draws a straight line to lower and lower profits.
Well, it’s true that ad agencies are under increasing pricing pressure–like a lot of businesses. But Sheehan’s perspective is an odd one. He starts by talking about all the new and planned startups that have gotten press lately–treating that like it’s a bad thing when there should be more consolidation and contraction in the business.
I certainly think there are way too many mediocre agencies. There always have been. But to call for more mergers will lead us to stay in the state we’re already in with holding company dominance and bloated, bureaucratic agencies. The future lies in startups and nimble independent shops. Advertising is an entrepreneurial business. Let’s hope it stays that way.
